‘Why government must halt borrowing of $3b to finance power sector’
• Group seeks transparent, accountable utilisation of resources
A group of experts under the aegis of the Association for Public Policy Analysis (APPA), as well as the U.S.-Nigeria Trade Council (USNTC), yesterday, in Abuja, asked the Federal Government to halt continuous borrowing to finance the power sector, until progress made in the sector since privatisation is adequately audited.
According to the Trade Council, Government needs to stop taking fresh loans, pointing out that the country “can’t afford it any longer”.
The Minister of Finance, Zainab Ahmed, had earlier disclosed that the Government’s request for a $3billion World Bank loan to finance the power sector was at the verge of being granted.
Coming at a time that Nigeria’s external debt had risen to N25.7trillion, the group noted that results of the over N1.2trillion sunk into power sector projects between 2015 and 2019, remained intangible.
Reacting to the proposed $3billion power sector loan from the World Bank, the USNTC explained that revenues and existing debt burden of over $25billion, would make it challenging to service the new loan given Nigeria’s limited revenues.
The Council’s Executive Director/CEO, Titus Olowokere, and Financial Advisor, Joseph Oyediran, said: “We recommend that Nigeria should stop taking new loans as we can’t afford it any longer, due to our national debt, most especially, foreign loans, which have more than tripled over the past four years from $7.5billion to over $25billion.
“Debt Service Cost to Revenue Ratio (DSCR) is almost 70% already; only 30% of FGN revenue is available for capital expenditures and recurrent expenditures due to revenue constraints. At the rate Nigeria is booking new loans, financial crisis may be imminent unless FGN retires at least $10 billion within its debt portfolio, to reduce annual debt service costs.”
Speaking at a news conference, National President of APPA, Princewill Okorie, said between 2017 and 2018, the Federal Government collected a $1billion performance-based loan from the World Bank to fix the power under the Power Sector Recovery Programme (PSRP).
“In our opinion, rather than collect loans, which increase Nigeria’s debt profile and eat up large chunk of the Federal budget in debt servicing like the 2020 budget proposal that has appropriated the sum of N2.45 trillion for debt servicing, efforts should be made to encourage the independent electricity distribution networks to function optionally.
“The advantage in this is that Federal or State government will not borrow to fund them in generation (GENCOs), transmission (TCN), and distribution (DISCO). In fact, through willing-buyer and willing-seller model, they will operate in a peaceful, and transparent way with the consumers without the corrupt practices of estimated billing methodology, disconnection without notice, collection of illegal reconnection fees, failure to repair faults contrary to customer service standard of performance for distribution companies,” he said.
Okorie argued that it is unpatriotic that distribution companies supported with government funds, irrespective of the existing privatisation policy have the penchant for operating in an inefficient manner that abuse the rights of Nigerians to efficient and affordable electricity with excuses of inadequate funding and inadequate tariff.
The group equally expressed concerns over donors and development agencies’ willingness to provide fund to government without getting consumer enumeration on impact of performance of the DISCOs, GENCOs and TCN on Nigerian consumers.
Okorie said: “As we speak, there is no publicly known data of the number of metered and unmetered consumers, and no information on the amount of money generated by DISCOS from consumers through estimated billing.
“World Bank and loan givers for Nigerian’s inefficient power, should, in understanding of privatisation, protection of consumers from abuses, and the need to create jobs, aim at encouraging power sector entrepreneurs through survey and mapping on the performing ones, fund consumer enumeration and education.”
Stressing the need for effective, efficient, transparent and accountable utilisation of resources provided by the Federal Government, Okorie said a new platform would lead advocacy and provide information on how government resources meant for the development of the zones are utilised.
“We strongly submit that debt servicing and ratio as percentage of the GDP may not be sustainable in the long run even though debt financing may be imperative for economic growth and development. The idea of PPP is an excellent mechanism to ensure effective and efficient utilisation of resources in the power sector.
“It is more important to look at debt ratio in terms of revenue earning of the country. Government has no business taking loan on behalf of the DISCOs. At best, the government may provide sovereign guaranty the DISCOs loan since they are private businesses,” he added.
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